92% of accountants feel they spend too much time on manual administrative and compliance tasks, preventing them from focusing on more strategic, high-value advisory roles. Additionally, 90% report that their heavy workload affects the quality of client services, while 85% express a desire for more opportunities to engage in strategic work.” – Source: Sage
The Canadian small and medium-sized enterprise (SME) market is growing, and with it, the need for accounting models that provide compliance and advisory services. Accounting firms relish the challenge to provide strategic advisory services, but they’re often limited by their dependence on compliance revenue.
The problem is that compliance work is time-consuming and labor-intensive. This is compounded when firms still use manual processes to meet regulatory deadlines. Very little time is left over for strategic advisory work.
Here’s a detailed look at why compliance services hinder advisory growth.
Compliance work consumes advisory capacity
Compliance work is inherently cyclical, heavily deadline-driven, and increasingly commoditized… Firms are locked in a race against time every busy season, working harder each year to maintain revenue, let alone grow it.” – Source: Thomson Reuters
Accounting firms usually deliver the same services across their client base. This covers everything from payroll and reconciliations to tax filing and regulatory reporting. And each month is (largely) the same. Except for tax season in the first quarter, which significantly increases the workload.
Firms don’t have the freedom to set compliance work aside and focus on advisory work, not with statutory guidelines and penalties for non-compliance piling on the pressure.
Impact on advisory development
- The demanding nature of compliance tasks eats into client hours, leaving no room for financial analysis.
- Strategy discussions are postponed until the filing periods end.
- Clients are often afraid of deadlines, so they keep meetings focused on regulatory requirements and not forward-looking strategies.
Compliance cycles are never-ending and include virtually every staff member. Not only is there no one left for advisory work, but there’s no time to develop a firm’s advisory capacity.
Filing pressure turns client conversations reactive
When teams are under pressure to meet filing deadlines, respond to regulatory queries, and maintain audit-ready documentation, advisory conversations are often deferred. Client meetings become reactive rather than strategic, focused on explaining compliance outcomes rather than shaping future decisions.” – Source: Alpha BPO
Client meetings tend to focus on resolving a current problem or clarifying information. The conversation sticks to documentation, submissions, and avoiding penalties. Time is devoted to compliance outcomes, not operational decisions. Forward-looking strategies are crowded out by retrospective information.
The results for strategic engagement don’t look good.
- Strategic planning is haphazard when it should follow a continuous path.
- Firms are more like data processors than long-term strategic partners.
When strategy is sidelined, SME business owners make important decisions based on compliance-related data. Instead of being guided by timely, insightful advice, they have no option but to use the data available, which is usually out of date.
Time-based billing reinforces compliance behavior
With automation, billing based on the time will eventually result in reduced fees and lower profits. Many accountants indicated that their goal is to move away from being valued for time to rather being valued for their financial and tax expertise, and to bill accordingly.” – Source: TydeCo
Traditional time-based billing models put a lot of pressure on staff to bring in as much new revenue as possible. This means more billable hours, as well as more pressure to squeeze all the new extra hours into schedules already stretched to breaking point.
However, pricing per employee or service is set. It ensures predictability, which is safe.
Advisory services, on the other hand, aren’t predictable. They don’t fit hourly billing structures.
Forcing advisory work into traditional billing systems can:
- Make clients nervous about discussions that run up time and costs.
- Make strategic conversations feel transactional rather than the real aim, which is collaborative.
- Ensure the focus is still on volume rather than value.
The net result is that firms continue to prioritize predictable billing structures that are safe and reliable.
Advisory work requires deeper analytical capability
These services require deep client relationships, a nuanced understanding of financial goals, and the ability to synthesize complex information into actionable strategies.” – Source: Wolters Kluwer
Advisory services require accountants to develop a deep understanding of their clients’ business models. It’s the only way to interpret client-specific financial data and transform it into valuable insights that support their unique operational context. Advisors analyze data from several sources for an all-around view of the business, including its place in the market.
There is another transformation: Client relationships become more engaging, encouraging collaboration, and imbuing clients with the confidence to add their insight to the process.
This is a challenge for compliance environments because:
- Strategic thinking doesn’t come easily when deadlines loom.
- Likewise, the concentration required for proper advisory analysis withers beneath the threat of penalties.
- It’s challenging to develop advisory skills when there’s seldom time for practice.
Advisory services are client- not task-focused. There’s no fragmentation, just consistent workflow that is tailored to each client’s circumstances.
Compliance workloads create structural limits on advisory growth
Shifting from a compliance to a consultancy model doesn’t have to be a massive overhaul-it can start with a simple, strategic soft launch. A measured, low-risk entry point allows you to evolve your business model while creating deeper client relationships and unlocking new year-round revenue opportunities.” – Source: Thomson Reuters
Accounting firms are not being purposely obtuse. They understand that advisory services play a strategic role in their evolution. Accountants don’t want to be limited by compliance tasks. They want to focus on higher-value work. But they’re still bound by administrative workloads. Compliance activities remain a priority, especially in the eyes of clients.
What can firms do to create a more strategic-friendly environment?
It starts with a commitment to recognize the importance of advisory work and redesign workflows to reduce the administrative load on senior staff.
In addition:
- Compliance efficiency becomes a prerequisite for advisory capacity.
- Dedicated time for analysis and strategic engagement is scheduled.
Change isn’t possible when old processes and operations are still in the picture. Firms that are serious about advisory growth must be willing to undergo structural change.
Advisory growth requires redesigning the operating model
When teams are under pressure to meet filing deadlines, respond to regulatory queries, and maintain audit-ready documentation, advisory conversations are often deferred. Client meetings become reactive rather than strategic, focused on explaining compliance outcomes rather than shaping future decisions.” – Source: Alpha BPO
Structural change: Fundamental change
Call it what you will, but there must be a significant shift in operations. Layering advisory services on top of existing compliance workloads won’t work. Firms must adopt an entirely different operating rhythm that includes structured time for analysis and planning.
To function properly, compliance processes must become more efficient while advisory delivery is transformed into repeatable engagement models.
In short, operational change to accommodate advisory services must comprise of:
- Automation to increase the efficiency of manual compliance tasks.
- Standardized workflows to reduce administrative workloads.
- Newly developed structural advisory offerings.
Ultimately, what firms want is for client conversations to be proactive about the future and not always reactive about history. This is necessary because only committed change to a firm’s operating model can support a permanent, successful transition to advisory services.